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Ahead of Q3 24 results on 7 November, iHeartMedia disclosed the execution of a transaction support agreement with holders of its term loans and notes which could help push the bulk of maturities out to at least 2028, though apparently with very little discount capture and no cash interest reduction.

The TSA, which also includes a detailed transaction term sheet and agreed forms of credit documents, contemplates a dual-track exchange of the vast majority of the company’s existing debt, due 2026 to 2028, into new debt maturing 2029 to 2031.

Source: Cleansing materials — company advisor presentation

Per the TSA terms, iHeart will launch two concurrent exchange transactions:

One (termed Comprehensive Transaction) involves the exchange of existing debt into new terms loans and notes issued by current borrower iHeartCommunications, subject to the participation of holders of least 95% of each tranche of term loans and notes (the company reported that it has agreement from holders of 80% of its total debt). 

The other (termed Alternative Transaction), which will be implemented in case a Comprehensive Transaction cannot, involves the exchange of existing debt into new term loans and notes issued by unrestricted subsidiaries into which certain assets will be dropped down (which we would note was the first LME option 9fin suggested would be implemented) and which will become lenders under a first lien intercompany loan. 

The company also published cleansing materials which include summary financial projections through 2028 for the company and its various segments, debt exchange terms and more revealing pro forma financial metrics for the company and the unrestricted subsidiaries in a presentation from company advisors. 

Creditors holding around 92% of iHeart’s $2.265bn in initial and incremental term loans due 2026, 77% of the $800m secured notes due 2026, 79% of the $750m secured notes due 2027, 38% of the $500m secured notes due 2028, and 71% of the $916.4m of unsecured notes due 2027 have executed the TSA.

Simpson Thacher served as counsel and PJT Partners served as financial advisor to iHeart. An ad hoc group comprised of certain TSA signatories were represented by Davis Polk and Perella Weinberg Partners. This AHG was reported by 9fin to be led by Pimco and include PGIM and BlackRock, and was understood to hold majorities across all of the company’s near-dated secured debt as well as the 2027 unsecureds — all of which have J.Crew protections.

Notably absent from the parties who have agreed to the transaction is the group holding a majority of the 2028 bonds advised by Akin Gump that remains bound by an active co-op, as previously reported by 9fin. 

On the Q3 24 earnings call, management had little else to share about the exchange transactions, but did note that they “look forward to continuing the dialogue with additional debt holders in the coming weeks”. 

In addition, the company amended the credit agreement for its undrawn $450m ABL due 2027 to allow for a 50bps or 100bps (depending on which transaction is completed) increase in the margin for loans under the ABL facility and modify certain covenants and default provisions should the debt exchange transactions close.

While quotes for iHeart’s secured and unsecured notes due 2026 and 2027 have shot up and common stock is at $2.23 per share, up nearly 28% from close on 6 November, the notes due 2028 are indicated marginally down at the time of publication.

Either transaction aims to extend existing maturities by three years, allowing the company to grow its Multiplatform and Digital Audio segments and delever by a minimal to moderate amount.

In exchange, participating creditors will be able to exchange at healthy premiums to trading prices and will receive interest rate step-ups on exchange.

To summarize the consideration for exchanging creditors under either transaction: 

The initial and incremental term loans due 2026, which were quoted at 84.8 cents and 84.2 cents respectively at close on 6 November, will receive 95-99 cents of consideration, with 1-5 cents in cash and 94 cents in new first lien term loans due 2029 with a 277.5bps (initial term loan) or 252.5bps (incremental term loan) margin step-up, subject to rating action-linked step-downs 

the secured notes due 2026, quoted at 86.2 cents, will receive 95-99 cents (the higher in case tendered by an early tender date), with 1-5 cents in cash and 94 cents in new first lien notes due 2029 with a 275bps coupon step-up to 9.125%

The secured notes due 2027, quoted at 67.7 cents, will receive 84-88 cents in new first lien notes due 2030 with a 250bps coupon step-up to 7.75%

The secured notes due 2028, quoted at 66.9 cents, will receive 75-79 cents in new in new first lien notes due 2031 with a 225bps coupon step-up to 7%

The unsecured notes due 2027, quoted at 53.6 cents, will receive 75-79 cents in new second lien notes due 2030 with a 250bps coupon step-up to 10.875%

In addition, as per the TSA, each initial and subsequent TSA signatory creditor will receive a fee, payable in incremental new debt, equal to 1% of the existing debt tendered by it. 

Also, there is a so-called hunter-gatherer provision, where certain TSA signatory creditors may purchase existing debt that remains outstanding following the exchanges and roll it up into new debt at a premium to the purchase price. 

Under the TSA, the outside settlement date for an exchange transaction is 31 December 2024.

This transaction requires the participation of at least 95% of each tranche of debt, and involves creditors exchanging into debt at the current borrower iHeartCommunications. The new, exchange debt will be secured by all existing collateral and will benefit from call protection through May 2028, bankruptcy make-wholes, tighter debt, liens investments and restricted payments baskets and various LME blockers.

Should this transaction be implemented (i.e., at least 95% of each tranche is tendered):

Non-participating term lenders will be lien subordinated to participating creditors, and will be subject to a turnover of any proceeds/recoveries to exchange debt issued to secured creditors and to exchange debt issued to unsecured creditors, in that order.

Non-participating noteholders will have their liens (existing secured notes only) and guarantees (existing secured and unsecured notes) released.

According to company filings, the TSA signatory creditors constitute the requisite maturities required to close this transaction. However, under the TSA, the participation thresholds for this transaction (see the Drop Down Exchange Offer section in the appended term sheet/definition of Requisite Alternative Majorities) — particularly for the 2027 maturities — appear to be higher than the holdings of the TSA signatory creditors disclosed in the 8-K. 

The transaction will have creditors exchange into debt at the unrestricted subsidiaries, except that, per the company advisor presentation included in the cleansing materials, the 2026 maturities (both existing loans and notes) will receive 0.5 cents of consideration in the form of iHeartCommunications secured debt and 93.5 cents in debt at the unsecured subsidiaries. Note that the TSA term sheet contemplates all maturities except the unsecureds due 2027 receiving 0.5 cents of consideration in the form of new iHeartCommunications term loans due 2029 or secured notes due 2030. 

The new, exchange debt will be secured by dropped-down assets and the intercompany loan (see details below) and guaranteed by the unrestricted subsidiaries, their holdco and their wholly-owned subsidiaries, and will benefit from call protection through May 2028, bankruptcy make-wholes, and tighter debt, liens investments and restricted payments baskets, but not necessarily outright LME blockers.

Should this transaction, and not the Comprehensive Transaction with its 95% participation threshold, be implemented:

Assets including FCC radio licenses, the Katz Media Group media representation business and certain AdTech assets will be dropped down into unrestricted subsidiaries. These assets will cease to secure the non-participating debt. Dropped down assets are forecast to generate $540m revenue, $252m adjusted EBITDA and $181m in unlevered cash flow (EBITDA less taxes, capex and net working capital) in FY 25, which is anticipated to grow to $666m revenue, $329m adjusted EBITDA and $213m in unlevered cash flow in FY 28 (see excerpted projections below). 

The unrestricted subsidiaries will also become lenders to iHeart RemainCo entities under a first lien pari passu intercompany loan of around $3.4bn (or higher if creditors other than the TSA signatories also participate), with 10% cash + 5% PIK interest ($150 max PIK a year), due 2031 and secured by assets securing existing secured debt. In case of bankruptcy, the intercompany loan claim will be subject to direction of the creditors at the unrestricted subsidiaries.

Non-participating secured creditors (existing term lenders and secured noteholders, but for the secureds due 2028 contingent on participation of creditors holding at least 50.1% of the 2028s) will be subject to a turnover of any proceeds/recoveries for the benefit of the intercompany loan (or indirectly the participating creditors through the unrestricted subsidiaries), but will retain their liens and guarantees

Non-participating holders of the unsecureds due 2027 will have their guarantees released

Excerpts from presentations — overall

Source: Cleansing materials. Subsequent pages contain revenue and EBITDA forecasts for each segment.

Excerpts from presentations — Comprehensive Transaction

Excerpts from presentations — Alternative Transaction

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iHeartMedia discloses agreement with creditor group on dual-track LME

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